Economic Essay Example | Topics and Well Written Essays - 1500 words - 4

Economic - shew Example(Travel classes, 2009)It is important to understand the concepts of one- expense polity and variable-price policy. One-price policy is when the selfsame(prenominal) price is fixed for the product by the seller, irrespective of who the consumer is. Variable-price policy is one whereby, seller sells the same product at varying prices to different customers. large manufacturers and big retailer usu all(prenominal)y follow one-price policy. On the other hand, small-scale manufacturers and small retailers follow variable-price policy. Variable-price policy is said to be prejudicial about the credibility and prestige of the customers. (R. D. Agarwal, p. 410, 1983)The concept of contribution pricing is relevant here. Contribution pricing is the setting of prices based on the principle that as long as an spot is sold for to a greater extent than the variable cost, it is making a contribution towards the overheads of the business. This notion may lead a firm toward s one of two approaches to pricing price distinction and loss leaders. In case of Eurostar, price distinction is relevant.Price discrimination occurs when different prices are charged to different people for what is essentially the same product. This is done in order to maximize revenue by charging more to those that can afford, and are spontaneous to pay more. Price discrimination is a response to the recognition that different types of people may confirm different price elasticities of demand for a product. For instance, people under 16 years of age experience high-price entrance to cinemas and football grounds in many parts of the world. This is because the owners know that high prices will spread out their demand substantially. In this case, as in all considerations of price discrimination, it is essential that there should be the minimum of crossover between market segments. In other words, if many adults could get in for half-price, the point of the discrimination woul d be lost.It is important to remember that price discrimination is when a firm sells the same product or service at varying process to different customers. This also applies to off-peak and on-peak telephone calls or train fares. Perfect price discrimination occurs when all the consumers are charged a different price, whereby the entire consumer surplus has been taken over by the business.For an understanding of the concept of consumer surplus, it is important to understand that a consumer good will be valued more highly by some consumers than by others. Yet they all pay the same price for it when invariant pricing policy is being applied. Some consumers would be willing to pay a price higher than the actual market price. The term consumer surplus refers to the value of the excess satisfaction which these customers get from the item, over and preceding(prenominal) what they have had to pay for it. The consumer surplus is shown on a supply and demand diagram by the trilateral enc losed by the demand curve and the price line. The demand curve shows how consumers value the product and all those who are prepared to pay at a higher price get some extra satisfaction. Source Tutor2uFor price discriminatory pricing, it is important that there be barriers for prevention of